February 02, 2021

Fighting an Uphill Battle

Based on recency / frequency metrics for customers, I measured the probability of the customer purchasing again in the next year. The data is outlined below. Take a look.

Click on the image to blow it up a bit ... it makes it easier to read the content.

Every month a customer fails to purchase is a month where the customer "retires" just a bit more. Read down the "Freq = 1" column. These are first-time buyers. Each row represents the number of months since the last purchase.

If the customer just purchased for the first time, the customer has a 24.4% chance of buying again in the next year (in our example). In other words, three out of every four first-time buyers won't purchase again in the next year. This company has a huge problem. You want to see this metric be in the mid-30% range for a company to have a fighting chance.

Now let's say you don't have a Welcome Program in place, you just have your standard barrage of marketing programs and discounts and what not. If the customer does not purchase in the first month, the customer drops down a row, to Recency = 2 (two months since the last purchase).

At this point, the customer has an 18.6% chance of buying again in the next year. The customer is starting to fade ... already ... after buying for the first time just two months ago.

Let' assume the customer doesn't buy again, and lapses into a third month.

At this point, the customer has a 16.9% chance of buying again in the next year.

This is why Customer Development is so darn important. You have all of these COVID buyers that were blessed upon you while we close in on a half-million deaths from the disease. And within a few months, those buyers begin to lapse. Each month that passes makes your job even harder!

Get busy!

Craft a program to convert your first-time buyers quickly. Don't let them fade into oblivion. Do something!! You've got the smarts to do great things. Don't start fighting an uphill battle, ok?

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